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TaxTMI 
TaxTMI 
TaxTMI 
2024 (2) TMI 1316
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....b-section (1) of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as the "IBC") appointing Resolution Professional ("RP") in CP (IB) No. 282/ND/2023 and CP (IB) No.285/ND/2023. Both the Appeals raising common questions of law and facts have been heard together and are decided by this common judgment. 2. Brief facts of the case necessary to be noticed for deciding the Appeal(s) are: (i) Bank of Maharashtra (Respondent No.1) granted loan in favour of Modern Instruments Private Limited in the year 2013. The debt was classified as a Non-Performing Asset ("NPS") on 27.07.2016. Both the Appellant(s), Shri CL Sharma and Shri Deepak Sharma were Personal Guarantors to the loan. (ii) On 26.07.2022, the Bank of Maharashtra issued recall notice and invocation of guarantee addressing to both the Appellant(s) as Guarantors. Bank of Maharashtra thereafter issued a Notice under Rule 7 of the Insolvency and Bankruptcy (Application to Guarantors to Corporate Debtor) ("Personal Guarantors Rules") and thereafter filed Applications under Section 95, sub-section (1), which were registered as CP (IB) No. 282/ND/2023 and CP (IB) No.285/ND/2023 against the Appellant(s) respectively i....
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....the Adjudicating Authority may take a decision as to whether the Applications are to be admitted or rejected under Section 100. It is submitted that there is no error in the appointment of RP. The learned Counsel for the Bank submits that at the stage of appointment of RP, the Adjudicating Authority has not to adjudicate any issue including issue pertaining to maintainability of the Applications and the Appellant(s) cannot raise the issue regarding maintainability of the Applications at the stage of appointment of RP. It is submitted that all issues, which are sought to be raised by the Appellant(s) in the present Appeal(s), have been decided by the Hon'ble Supreme Court in Writ Petition (Civil) No. 1281 of 2021 in Diliip B Jiwrjka vs. Union of India & Ors. decided on 09.11.2023, where Hon'ble Supreme Court has considered the entire scheme pertaining to application against the Personal Guarantor and has categorically held that stage for consideration of all issues is at the time when Application under Section 100 is considered by the Adjudicating Authority for admission or rejection. The learned Counsel for the Bank submits that it is always open for the Appellant(s) to file object....
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....f resolution professional'. Section 99 deals with 'Submission of report by the resolution professional'. Section 99 of the IBC is as follows: "99. Submission of report by resolution professional. - (1) The resolution professional shall examine the application referred to in section 94 or section 95, as the case may be, within ten days of his appointment, and submit a report to the Adjudicating Authority recommending for approval or rejection of the application. (2) Where the application has been filed under section 95, the resolution professional may require the debtor to prove repayment of the debt claimed as unpaid by the creditor by furnishing - (a) evidence of electronic transfer of the unpaid amount from the bank account of the debtor; (b) evidence of encashment of a cheque issued by the debtor; or (c) a signed acknowledgment by the creditor accepting receipt of dues. (3) Where the debt for which an application has been filed by a creditor is registered with the information utility, the debtor shall not be entitled to dispute the validity of such debt. (4) For the purposes of examining an application, the resolution professional may seek such further in....
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....arliament. The entire process of implementing these time lines would be rendered nugatory if an adjudicatory role were to be read into the provisions of Section 97(5). The final reason which would militate against accepting the submission is that the provisions of Section 99 do not as such implicate any adverse civil consequences particularly if those provisions are read in the manner in which we now propose to elucidate. 3. A right of representation has been provided under Section 99(2) 75. On behalf of the petitioners, it has been submitted that the resolution professional has been empowered to make wide ranging enquiries for the purpose of eliciting information under sub-section (4) of Section 99. In our view, it is necessary to clarify the ambit of sub-section (4) of Section 99. Sub-section (4) is prefaced by the words "for the purposes of examining an application". In other words, the information which the resolution professional is empowered to seek or the explanation which the resolution professional can require to be furnished is for that purpose. That apart, sub-section (4) also goes on to specify that the information or explanation may be sought in connection with t....
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....-moratorium does not act to freeze the assets and legal rights and title of the debtor. Once a recommendation is made, it is not binding on the adjudicating authority. The authority would only decide after looking at the recommendation of the resolution professional and affording full opportunity of hearing to the debtor or the personal guarantor, as the case may be. Consequently, the petitioners' argument lacks merit when assessed against these established legal principles. 77. Rules have been framed in 2019 in pursuance of the provisions of Section 239(2). The Rules, inter alia, provide for the Form (Form A) in which an application under Section 94 has to be submitted; the Form (Form B) in which a demand notice has to be served under Section 95(4) on the guarantor demanding payments; and the Form (Form C) in which an application has to be submitted under Section 95(1). Form A is the statutory Form in which an application is submitted by the debtor. Form C, on the other hand, is the statutory Form in which an application is submitted by a creditor. Form C is required to be filled in by the creditor who institutes an application for the initiation of the insolvency resolutio....
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.... judicial review; (iv) The resolution professional may exercise the powers vested under Section 99(4) of the IBC for the purpose of examining the application for insolvency resolution and to seek information on matters relevant to the application in order to facilitate the submission of the report recommending the acceptance or rejection of the application; (v) There is no violation of natural justice under Section 95 to Section 100 of the IBC as the debtor is not deprived of an opportunity to participate in the process of the examination of the application by the resolution professional; (vi) No judicial determination takes place until the adjudicating authority decides under Section 100 whether to accept or reject the application. The report of the resolution professional is only recommendatory in nature and hence does not bind the adjudicatory authority when it exercises its jurisdiction under Section 100; (vii) The adjudicatory authority must observe the principles of natural justice when it exercises jurisdiction under Section 100 for the purpose of determining whether to accept or reject the application; (viii) The purpose of the interim-moratorium under Sectio....
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....rsonal Guarantor has also been given right to file the objection to the Report. When the right has been given to the Personal Guarantor to submit its objection or explanation or information, it is open for the Personal Guarantor to give all necessary information and objection to the Report. The Hon'ble Supreme Court has clearly in the Diliip B Jiwrjka judgment held that Report has to be submitted after giving opportunity to the Guarantor. In paragraph 66 and 67, the Hon'ble Supreme Court has laid down following: "66. The resolution professional cannot decide that issue in the absence of an opportunity to the debtor to furnish an explanation and to produce material evidencing the payment of the debt. Likewise, sub-section (4) of Section 99 empowers the resolution professional, in the course of carrying out an examination of an application to seek further information or explanation in connection with the application from the debtor or the creditor. The expression "in connection with the application" indicates that Parliament has not contemplated a roving enquiry by the resolution professional but an enquiry for the purpose of making the ultimate recommendation in the report on the ....
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....h is directed to the regulation or supervision of matters as distinguished from an order which decides the rights of parties or confers or refuses to confer rights to property which are the subject of adjudication before the Court. One of the tests would be whether a matter which involves the exercise of discretion is left for the decision of the authority, particularly if that authority were a Court, and if the discretion has to be exercised on objective, as distinguished from a purely subjective, consideration, it would be a judicial decision. It has sometimes been said that the essence of a judicial proceeding or of a judicial order is that there should be two parties and a lis between them which is the subject of adjudication, as a result of that order or a decision on an issue between a proposal and an opposition. No doubt, it would not be possible to describe an order passed deciding a lis before the authority, that it is not a judicial order but it does not follow that the absence of a lis necessarily negatives the order being judicial. Even viewed from this narrow standpoint it is possible to hold that there was a lis before the Company Judge which he decided by passing the....